The benefits digital tools offer financial institutions are numerous, but they also have enormous risks. Cyber attackers are becoming more prolific, attacking businesses of every size and sector.
In response, government organizations have enacted many cybersecurity regulations institutions in the financial sector should comply with. Because financial companies often handle their client’s personal and financial information, they must safeguard that data from malicious actors.
These regulations cover a wide range of topics to cover every aspect of cybersecurity. Following them is essential for financial institutions to protect themselves from the dangers of cybercriminals. However, because of their scope, it can be challenging to follow all of them to the finest detail.
Essential Cybersecurity Regulations To Follow
Here are a few of the most important regulations to pay attention to and how to fulfill their requirements.
If a financial organization does business within or has clients hailing from the European Union, it must comply with the General Data Protection Regulation. Also known as GDPR, these are a set of obligations that apply to any financial institution that handles the personal data of EU citizens. These regulations also apply to companies not strictly based in the EU.
Following these regulations are mandatory, and failure to comply can result in heavy fines surpassing 10 million euros. These laws were created not only to protect the personal data of EU citizens but also to protect their right to transparency and communication regarding the use of their data. These can include requiring the business’s cybersecurity to be up to global standards — lest they incur hefty fees.
GDPR compliance requires companies to be lawful and transparent in their use of their clients’ data. Organizations should use the data sparingly and always keep their clients informed about when and how their personal information is used.
One of the chief cyber security concerns in the financial sector is the issue of credit card fraud. While credit cards and digital finance tools have made sending and managing money easier than ever, they also come with dangers. These are exemplified in several high-profile data breaches of well-known financial institutions such as First American Financial.
To protect businesses and financial institutions from credit card fraud, the Payment Card Industry Security Standards Council — also known as the PCI SSC — created a set of rules to ensure all enterprises that operate with credit card information maintain security. PCI compliance sets cybersecurity standards to avoid fraudulent activity and mitigate data breaches.
To comply with PCI, financial institutions must use the latest cybersecurity measures to safeguard their client’s credit card data. These include antivirus software, firewalls, password protection, and multi-factor authentication.
The U.S. Congress passed the Sarbanes-Oxley Act in 2002. More commonly known as SOX, the act protects publicly traded company shareholders from corporate fraud. The law was inspired by the events of Worldcom and Enron, which negatively impacted investor confidence in publicly traded U.S. businesses.
Unlike GDPR, not all enterprises must comply with SOX — only those publicly traded in the U.S. These include wholly owned subsidiaries of foreign businesses and organizations that raise debt or equity on U.S. public exchanges.
Companies that comply with SOX must provide periodic reports that an independent third party has audited. Accounting firms that provide audits cannot offer other services, such as consulting or taxes. Financial statements must comply with GAAP — they must fairly represent the most current financial state of the business.
Cybersecurity Regulations Protect Companies
While it can be challenging to follow all these rules, organizations that handle clients’ data must do so to protect that information and their reputations. These regulations will keep a financial institution safe in a world where cyberattacks can strike anytime.